Investigating Banks, Money and Debt

A considerable amount of our time is spent thinking about, worrying about, saving, spending and earning money. Studies show that not having enough money, and especially being in debt, causes serious physical and mental distress. (source 123) No one is immune to debt, and the majority of us are in some form of financial debt. (source 123) This article investigates why banks put people into debt, uncovers why a world without any debt is completely possible, and explains the paradigm shift needed for this to happen.

We are taught by economists and economic textbooks that our modern-day monetary system is the result of our historic evolution as we developed the practical need for a more effective way than barter to exchange goods and services between individuals within the marketplace (source 123).

The modern word ‘bank’ does indeed stem from the word ‘banca‘ used in Italy during the Middle Ages, and the goldsmiths of 17th Century England are often given as an example of where contemporary banking began (source 123).

This is because the fractional reserve banking system that commercial banks use today works in a very similar way to how goldsmiths managed people’s money (source).

In those days, people would deposit their gold for safe keeping with the goldsmiths who then issued a paper receipt, or promissory note, for the gold which they stored in their vaults. Since few people ever requested to withdraw their gold at any given time, the goldsmiths would loan the depositor’s gold back out to others in the form of promissory notes, making good profits from the interest they charged on the loans (source).

Today, when you deposit money in your chosen commercial bank, the bank also loans out your deposited money to others. Typically, banks then keep a fraction of the deposits on reserve in case depositors wish to withdraw their savings (source).

Analysing this system critically, we see that if the reserve requirement is set at 10%, for example, and only 10% of our actual original deposits still exist in the bank, this means that if there is a sudden panic, and everyone runs to the bank to withdraw their funds, the bank will never have all our deposited money available for everyone to withdraw their savings. This is why bank runs cause banks to collapse (source).

Furthermore, from an initial deposit of say $10,000, commercial banks actually ‘create’ an extra $90,000 of money out of nothing, and the more times that banks loan out money created from that initial $10,000 deposit, the more people out there who now have to work in order to pay back all the interest on the money created (source).

Moreover, the very first sophisticated banks using money for deposits and lending have in actual fact been traced back to planet Earth’s very first known civilisation, the 6000-year-old ancient culture of Sumer in the area of Mesopotamia (source 12) where the Sumerian kings used money as a tool to rule over their subjects through the implementation of a kingdom’s bank which issued clay tokens as receipts, or promissory notes, for interest repayments made with silver (source).

Using banks as a tool to rule over people obviously paints a much more negative picture of our monetary system; yet if we critique the use of money from this perspective, it is indeed the world’s central banks that have this sovereign power of control over kingdoms, or nations, today (source 12).

This is because central banks do not carry out fractional reserve lending of money stored in their vaults like commercial banks; instead, their role is to actually create a nation’s official money – or legal tender.

Central banks then loan out that legal tender to the nation’s government, and the people pay back the government’s debt, as well as the interest the government incurs when it borrows the money, via income tax on wages.

The government’s debt is then expanded further by commercial banks through loans to the public with further interest. Since the extra money needed to pay back all this interest does not exist, central banks need to create more money so there is enough money in circulation.

This causes the value of each individual bank note to decrease, so prices go up (inflation) and people now have to work even more hours – not just to pay all the interest back, but now also to buy the things they could afford before.

Central banks also decide what the interest rates will be, which means they also control booms and recessions, or business cycles. Lowering interest rates means that more people feel comfortable taking out loans. As more money then goes into circulation, jobs are created, people have lots of work, and they can easily make their repayments. But if interest rates are then increased, money is sucked back in to cover the higher interest rates, people lose their jobs, and can no longer pay their debts (source).

Finally, since all money created in a central bank is lent out as debt, if people can no longer pay their debts, the commercial banks and government can also not pay back the central bank, and the central bank collapses, but since the money was created on a computer screen, more money can just be created, and no one is held accountable.

This is what happened in the 2008 financial crisis, and it led to a mass demonstration in the financial district of New York. Occupy Wall Street brought to the public’s attention one often ignored and extremely important fact – the people who own these central banks, and wield all this immense power, are private banking families.

The first modern central bank was the privately owned Riksbank of Sweden which was managed by the king and began operations in 1668, but it was in 1694, when the King of England required funds to build a powerful navy to fight the French, that incredibly wealthy private individuals provided the money in return for the formation of a private central bank called the Governor and Company of the Bank of England.

In this instance, extremely wealthy private banking families successfully gained huge direct influence over king and government, becoming the only limited-liability corporation allowed to issue bank notes, and given exclusive possession of the government’s balances (source 12).

By 1783, when America won its independence from England, the Founding Fathers were well aware of the perils of central banks; for the Bank of England had outlawed the interest-free independent currency that had brought prosperity to the colonies, thus creating the hardship and despair that was the true cause of the American Revolution (source 123).

Yet the power and influence of the Rothschilds, the Rockefellers, the Morgans, the Warburgs, and a few other dominant families in the worldwide banking and business world had now become immense; (source 12) Congressman Charles Lindberg, et al, now often negatively referred to these secretive interconnected inbreeding banking families, with their sights set on forming a permanent central bank (source), as the “Money Trust” (source 12).

Investigations into the causes of the Panic of 1907 suggest that JP Morgan and the “Money Trust” deliberately triggered banks runs on some of the highly successful and profitable trusts (source) by spreading insolvency rumours that would cause several of them to fail (source 123), at the same time influencing politicians and the public that a central bank would bring stability (source 12).

In 1910, a secret meeting between these banking elites, Senator Nelson Aldrich, and Assistant Secretary of the Treasury Department A.P. Andrews, was held on Jekyll Island off the coast of Georgia (source 123456). It was there that the central banking bill called the Federal Reserve Act was drawn up.

Congressman Louis Mcfadden, during his 1932 House Speech, later stated: “President Wilson died a victim of deception. He said that he knew very little about banking. It was, therefore, on the advice of others that the iniquitous Federal Reserve Act, the death warrant of American liberty, became law in his administration.” (source 12)

Only 16 years after the Federal Reserve was instated, it substantially increased the money supply, increasing unsustainable lending and borrowing. Then, just like 1907, bank runs, bankruptcy and systemic collapse occurred (source).

As the USA experienced the Great Depression, the elite “Money Trust” bankers had already pulled their money out of the stock market. Then, after the crash, they used that money to buy up cheap stocks and smaller failing banks (source 12).

The near collapse in 2008 also resulted from the deliberate expansion of complex loans into the market that the bankers knew would eventually fail. As technology develops, the techniques for loaning out and gambling with money have become more convoluted, but the pump and dump scheme continues to consolidate wealth and power with those in the know, while the ordinary working person is literally paying the price (source).

The self-proclaimed purpose of the the central bank of all central banks, the Bank for International Settlements (source 12) is for its 60 member central banks to work together to establish “monetary and financial stability.” These elite central bankers are also intrinsically involved in the International Monetary Fund along with its 189 member countries, as well as the World Bank whose goal is to “end extreme poverty.”

But today, the richest 1% own more than the other 99% put together, and 62 people own as much wealth as the poorest half of the entire world’s population (source 12); it is essential then to consider, since a person can only spend so much money in one lifetime, why these people are accumulating all this wealth.

The facts demonstrate that the aim of this elite group of the world’s wealthiest and most secretive individuals has never been to create stability or to end poverty, but rather to control governments and have the monopoly over who eats and who goes hungry (source 12).

The global banking system is, in effect, a modern form of serfdom as the mass of society work to pay back endless debt to an elite group of rulers. Not only that, but studies repeatedly show that these rulers very likely also have psychological personality disorders (source 12345).

But the most important fact of all is perhaps that this central banking elite can only enslave the people as long as the people allow them to do so (source 1234).

The money that central banks produce today is fiat money, or ‘faith’ promissory notes, meaning it is not backed by gold or silver, it cannot be redeemed in any material form, and it actually has no material value.

In other words, the value of money comes entirely from the central banks’ promise that the money itself has some intrinsic value. The use of fiat money, and the necessity to pay bank debt, depends entirely on the people’s belief that they need to actually do so.